Leveling the playing field

Whether a resident of Ohio pays for a product at the cash register of a local store or while sitting at home in front of a computer screen, he or she is subject to sales tax.

Whether a resident of Ohio pays for a product at the cash register of a local store or while sitting at home in front of a computer screen, he or she is subject to sales tax.

The Marketplace Fairness Act, approved by the U.S. Senate with bipartisan support last week, simply provides enforcement for that rule and closes a loophole that most consumers have exploited to avoid paying taxes when shopping online, thereby giving out-of-state online sellers an advantage over local retailers.

The House should follow suit and approve the bill, which will aid states as well as all the hardworking local retailers that are losing business to online sellers, who effectively can offer discounts of 6 or 7 percent based on the fact that most people wonít pay taxes on their Internet purchases. Rather than instituting a ďnewĒ tax, the law simply would close a loophole ó created by a court decision in 1992, predating the widespread use of the Internet ó that has prevented states from collecting tax already due them.

Itís important to note that the state isnít looking to just take more of a bite out of the wallet of Ohioans.

A 2011 University of Cincinnati study estimated that retailers in the state lost more than $600 million in sales in 2011 to out-of-state merchants because of the tax advantage. The retail industry, already Ohioís largest private employer with more than 1.5 million jobs, could add thousands of jobs for state residents if the gap was closed. Landlords have been losing millions of dollars annually in rent for commercial property that retailers might use to expand if they no longer faced the tax disadvantage.

The tax-revenue loss to the state of Ohio is substantial: The University of Cincinnati study estimated that Ohio lost more than $200 million in 2011 alone to unpaid taxes on Internet sales.

The retail industry, represented by the Ohio Council of Retail Merchants, has requested that money the state collects from Internet taxes be used to pay for the income-tax cut that is in next yearís state budget.

Ordering online is just the first step in a process that still involves physical delivery of products. This delivery usually involves trucks, at least for the final portion of the trip to the consumerís home; that means wear and tear on the stateís roads, which are expensive to maintain, as well as more waste inlandfills.

Retailers must collect and remit tax to the state on their products that arrive at the store by truck; it only makes sense that an out-of-state retailer should not be able to dodge paying into the system this way simply because its order was received in a distant location.

Two main arguments that have been levied against the bill are that it will drive mom-and-pop Internet retailers out of business, and that itís a money grab that amounts to taxation without representation. But the law specifically exempts retailers with sales of less than $1 million; surely a business above that threshold can invest in the simple, widely available software to handle this task. And again, this is an existing tax, and one that Internet retailers already are collecting in states where they have retail stores or warehouses.

Voting for what some will claim as an effective tax increase on consumers isnít often easy for politicians. In this case, though, itís clearly the right thing to do, and in the best interest of Ohio and its residents.